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EXHIBIT 10.31
STOCKHOLDERS AGREEMENT
This STOCKHOLDERS AGREEMENT (this "Agreement") is made as of this 10th
day of October, 1997 by and among Digital Television Services, Inc., a Delaware
corporation (the "Company"), and the stockholders (the "Stockholders") listed on
the signature pages hereto.
WHEREAS, the Company was formerly a Delaware limited liability company
known as Digital Television Services, LLC (the "LLC") and the Stockholders were
all of the members of the LLC; and
WHEREAS, in accordance with the Amended and Restated Limited Liability
Company Agreement of the LLC (the "LLC Agreement"), the LLC has been converted
into the Company pursuant to a Preferred Stock Corporate Conversion (as defined
in the LLC Agreement); and
WHEREAS, the LLC Agreement requires the Stockholders to enter into this
Stockholders Agreement in order to set forth certain agreements with respect to
the management of the Company, the transfer of the securities of the Company now
owned or hereafter acquired by each of the Stockholders and certain other
matters;
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein contained, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto agree
as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. DEFINITIONS. When used herein, the following terms shall
have the following meanings:
"Affiliate" shall mean, with respect to any specified Person, any other
Person that directly or indirectly controls, or is under common control with, or
is owned or controlled by, the specified Person. For purposes of this
definition, (i) "control" means, with respect to any specified Person, either
(x) the beneficial ownership of 50% or more of the equity securities issued by
such Person or (y) the power to direct the management and policies of the
specified Person through the ownership of voting securities or other equity
interests, by contract or otherwise, (ii) the terms "controlling," "control
with" and "controlled by," etc., shall have meanings correlative to the
foregoing, and (iii) the stockholders and partners of such Person shall be
deemed to be Affiliates of such Person, provided, however for purposes of the
limitation on transactions with Affiliates set forth in Section 2.3(a)(viii)
(including the definition of Permitted Reimbursements), the percentage in clause
(i)(x) above shall be 10% and clause (iii) shall include officers, directors and
employees.
"Board of Directors" shall mean the board of directors of the Company.
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"Certificate of Designations" shall mean the Certificate of
Designations of the PIK Preferred Stock as filed with the Secretary of State of
the State of Delaware, as amended from time to time.
"Change of Control of the Company" means (i) the merger, consolidation
or other business combination of the Company or any of its Subsidiaries with or
into, or the merger of, another Person (other than the Company or a Subsidiary
of the Company) with or into the Company with the effect that, immediately after
such transaction, the stockholders of the Company immediately prior to such
transaction hold less than a majority in interest of the total voting power
entitled to vote in the election of directors, managers or trustees of the
Person surviving such transaction or less than 50% of the economic interests in
such Person, or (ii) the acquisition by any Person or related group of Persons,
by way of merger, sale, transfer, consolidation or other business combination or
acquisition, of (x) all or substantially all of the assets, property or business
of the Company, (y) more than 50% of the total voting power entitled to vote in
the election of directors, managers or trustees of the Company or such other
Person as survives the transaction, or (z) more than 50% of the economic
interests in the Company or such other Person as survives the transaction.
"Change of Control of Columbia" shall mean, and such Change of Control
of Columbia shall be deemed to have occurred after, either of the following
events:
(A) if at any time, any Person or group of Persons other than
those Persons identified in that certain Class A Unit
Membership Interest Purchase Agreement between the LLC,
Whitney, Fleet and Columbia dated as of February 10, 1997 as
members of Columbia, partners of Columbia DBS Investors, L.P.,
shareholders of Columbia Capital Corporation or shareholders
of Columbia DBS, Inc., and their Family Members shall own in
the aggregate 50% or more of the partnership interests, member
interests, capital stock or other equity interests in either
Columbia or Columbia DBS Investors, L.P. or any successor
entity to either of them, or
(B) if at any time, Persons other than Xxxxxx X. Blow, Xxxxx X.
Xxxxxx, Xx., Xxxxx X. Mixer, Xxxx X. Xxxxxx, Xxxx X. Xxxxxxx,
Xxxxx X. Xxxxxx III, R. Xxxxxxx Xxxxxx III, Xxxxx Xxxxxxx,
Xxxxxx Xxxxxxxxx, or Xxxx X. Xxxxx shall constitute a majority
of the board of directors of the general partner of Columbia
DBS Investors, L.P., the managers of Columbia, or otherwise
have a majority of the votes on any board of directors, board
of managers or similar governing body that has plenary
authority over the business and affairs of Columbia or
Columbia DBS Investors, L.P. or otherwise has the power to
direct either of such Stockholder's investment in the Company.
"Xxxxxxxx" shall mean Xxxxxxxx Partners III, L.P., a Delaware limited
partnership.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, or any successor federal revenue law.
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"Columbia" shall mean Columbia DBS Class A Investors, LLC, a Delaware
limited liability company, or its successors or assigns.
"Columbia Entities" shall mean Columbia Capital Corporation, Columbia,
Columbia DBS, Inc. and Columbia DBS Investors, L.P.
"Common Stock" shall mean the Common Stock, par value $.01 per share,
of the Company.
"Employee Stock Plan" shall mean the arrangements, terms and procedures
that the Company may establish from time to time for the issuance of up to
100,000 shares of Common Stock (or such larger number of shares of Common Stock
as may be approved by (i) the "Compensation Committee" of the Board of
Directors, or if no such committee exists, the Board of Directors and (ii) the
holders of at least 70% of the shares of PIK Preferred Stock) to employees or
independent contractors of the Company or any Subsidiary at prices equal to the
market value thereof as of the date of issuance and pursuant to such terms and
conditions (including vesting) as the Board of Directors shall determine.
"Family Member" shall mean (a) with respect to any individual, such
individual's spouse, any descendants (whether natural, adopted or in the process
of adoption), any trust all of the beneficial interests of which are owned by
any of such individuals or by any of such individuals together with any
organization described in Code Section 501(c)(3), the estate of any such
individual, and any corporation, association, partnership or limited liability
company all of the equity interests of which are owned by those above-described
individuals, trusts or organizations and (b) with respect to any trust, the
owners of the beneficial interests of such trust.
"Fiscal Year" shall mean the calendar year.
"Fleet" shall mean collectively, the group consisting of the following
entities, or their successors: Fleet Venture Resources, Inc., a Rhode Island
corporation, Fleet Equity Partners VI, L.P., a Delaware limited partnership,
Xxxxxxxx and Xxxxxxx Plaza Partners, a Rhode Island general partnership.
"Interim Financing" shall mean the issuance by the Company of up to
$25,000,000 of indebtedness prior to any Qualified Financing or IPO the proceeds
of which are used to fund the Company's acquisition of NRTC System Nos. 0422,
1071, 0120, 0073, and 0164 located in Georgia and Alabama.
"Liquidation Preference" shall have the meaning ascribed thereto in the
Certificate of Designations.
"NRTC" shall mean the National Rural Telecommunications Cooperative.
"NRTC System" shall mean any one of the geographical areas within the
United States of America specifically designated by the NRTC, within which the
NRTC has granted to any Person rights to distribute direct broadcast satellite
services.
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"Permitted Reimbursements" shall mean the reimbursement by the Company
or any of its Subsidiaries to the Columbia Entities, Whitney or Fleet, or any of
their Affiliates of actual out-of-pocket travel expenses not to exceed $7,500
per year in the aggregate, and such other expenses as may be approved prior to
payment by the Chief Executive Officer or Chief Financial Officer of the
Company, and the Xxxxxxxx Designee and one Whitney Designee, which expenses in
each case are incurred in connection with services to the Company or any
Subsidiary in connection with the ongoing business and affairs (including
financing and acquisitions) of the Company or any Subsidiary, other than
services as a member of the Board of Directors or similar services associated
with monitoring the investment by Columbia, Columbia DBS Investors, L.P. or
Columbia DBS, Inc., Whitney or Fleet.
"Permitted Transferee" shall mean (i) in the case of Whitney, Whitney's
Affiliates and the Family Members of those Affiliates who are individuals, (ii)
in the case of each entity comprising the collective definition of "Fleet", the
Affiliates of such entity and the Family Member of those Affiliates who are
individuals (iii) in the case of Columbia, (a) Columbia's general partner
(Columbia Capital Corporation) and (b) Columbia Capital Corporation's and
Columbia's Affiliates and the Family Members of those Affiliates who are
individuals, and (iv) in the case of any other Stockholder, any Family Member of
such Stockholder; provided, however, that in each case such Person shall agree
in writing with the parties hereto to be bound by and to comply with all
applicable provisions of this Agreement.
"Person" shall mean any natural person, partnership, trust, estate,
association, limited liability company, corporation, custodian, nominee,
governmental instrumentality or agency, body politic or any other entity in its
own or any representative capacity.
"PIK Preferred Stock" shall mean the Series A Payment-in-Kind
Convertible Preferred Stock, par value $.01 per share, of the Company.
"Preferred Stockholders" shall mean the record holders of the PIK
Preferred Stock and a "Preferred Stockholder" shall mean any one of them.
"Prime Rate" as of a particular date shall mean the prime rate of
interest as published on that date in the Wall Street Journal, and generally
defined therein as "the base rate on corporate loans posted by at least 75% of
the nation's 30 largest banks." If the Wall Street Journal is not published on a
date for which the Prime Rate must be determined, the Prime Rate shall be the
prime rate published in the Wall Street Journal on the nearest-preceding date on
which the Wall Street Journal was published.
"Qualified Financing" means the first issuance after February 10, 1997
of $50,000,000 or more of indebtedness by the Company or any Subsidiary in a
single transaction, in which case the Company may issue equity (or rights to
acquire equity) in the Company in the same transaction constituting no more than
5.0% of the outstanding capital stock of the Company on a fully-diluted basis
without resulting in the price protection under Section 6(e)(iii) of the
Certificate of Designations.
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"Registration Rights Agreement" shall mean that certain registration
rights agreement dated February 10, 1997, by and among the LLC and the members
of the LLC on the date of such agreement.
"Stock" shall mean the Common Stock and the PIK Preferred Stock.
"Subsidiary" shall mean any entity more than 50% of the equity
interests of which are owned directly or indirectly by the Company or more than
50% of the total voting power entitled to vote in the election of directors,
managers, general partners or trustees of which is held directly or indirectly
by the Company.
"10% Stockholder" shall mean any Stockholder that holds at least 10% of
all outstanding capital stock of the Company, and in all events the term "10%
Stockholder" shall include Columbia, Columbia DBS Investors, L.P., Whitney, and
each entity that is part of the group of entities collectively defined as
"Fleet" herein.
"Transfer" shall mean any sale, assignment, transfer, conveyance,
pledge, hypothecation, or other disposition, voluntarily or involuntarily, by
operation of law, with or without consideration, or otherwise (including,
without limitation, by way of intestacy, will, gift, bankruptcy, receivership,
levy, execution, charging order or other similar sale or seizure by legal
process) of all or any portion of any asset.
"Transfer Notice" shall mean written notice given to the Company and
all Stockholders of all the details of any proposed Transfer of Stock including
the name of the proposed transferee, the date of the proposed Transfer, the
portion of the Stockholder's Stock to be transferred, the price or other
consideration, if any, to be received, and a complete description of all noncash
consideration to be received.
"Vote Shift" shall mean (a) in the case there is a seven member Board
of Directors, (i) the elimination of the extra vote held by each of the two
directors entitled to two votes, and (ii) the increase in the number of votes
held by the Xxxxxxxx Designee and one of the Whitney Designees, in each case
from one vote to two votes, with the result that the Xxxxxxxx Designee and the
Whitney Designees shall have, in the aggregate, five of the nine votes on the
seven-member Board of Directors, and (b) in the case there is a nine member
Board of Directors, (i) the increase in the number of votes held by the Xxxxxxxx
Designee and one of the Whitney Designees from one vote to two votes each, and
(ii) the increase in the number of votes held by the other Whitney Designee from
one vote to three votes, with the result that the Xxxxxxxx Designee and the
Whitney Designees shall have, in the aggregate, seven of the thirteen total
votes on the nine member Board of Directors.
"Whitney" shall mean Whitney Equity Partners, L.P., a Delaware limited
partnership, or its successors or assigns.
SECTION 1.2. ADDITIONAL TERMS. The following terms shall have the
meanings indicated or referred to in the following Sections of this Agreement:
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Term Section
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1933 Act 4.2(d)
AAA 6.10(b)
AAA Rules 6.10(b)
Agreement Introductory Paragraph
Appraisal Process 4.5(a)
Arbitration Notice 6.10(c)
Arbitrators 6.10(b)
Change Notice 5.1(b)
Xxxxxxxx Designee 5.1(a)
Class B Units 2.4(a)
Closing 4.4(b)
Company Introductory Paragraph
First Arbitrator 6.10(e)
Indirect Transfer 4.3(b)(iv)
LLC Introductory Paragraph
LLC Agreement Recitals
Offered Stock 4.3(a)
Optional Purchase Event 4.3(b)
Petitioner 6.10(d)
Respondent 6.10(d)
Second Arbitrator 6.10(e)
Sole Arbitrator 6.10(d)
Third Arbitrator 6.10(e)
Valuation Date 4.3(d)
Whitney Designee 5.1(a)
ARTICLE II
CONDUCT OF BUSINESS
SECTION 2.1. SCOPE OF ARTICLE. The provisions of this Article II shall
apply to all Stock held by any Stockholder, whether or not held or acquired by
such Stockholder on or after the date of this Agreement or at or after any time
such Stockholder first became subject to this Agreement.
SECTION 2.2. INFORMATION TO BE PROVIDED. Within ninety (90) days after
the end of each Fiscal Year, each Stockholder shall be furnished with annual
financial statements containing a balance sheet, income statement, and statement
of changes in working capital as of or for the Fiscal Year then ending which
financial statements shall be prepared in accordance with generally accepted
accounting principles and shall be audited by Xxxxxx Xxxxxxxx LLP or such other
firm of independent certified public accountants as may be selected by the Board
of Directors and reasonably satisfactory to the holders of at least 70% of the
PIK Preferred Stock. The Company shall also provide to each of Whitney, Fleet
and such other Stockholders as the Board of Directors may determine (i) an
annual operating budget and capital expenditure budget
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for each Fiscal Year (which shall be delivered prior to December 1 of the
previous Fiscal Year); (ii) unaudited quarterly financial statements within 45
days of the completion of each calendar quarter of the Fiscal Year; and (iii)
unaudited monthly financial statements containing a balance sheet, a statement
of income, and a statement of changes in working capital and showing variances
to the annual operating budget and capital expenditure budget within 30 days
after the last day of each month.
SECTION 2.3. BOOKS AND RECORDS; VISIT TO BUSINESS PREMISES. The Company
shall keep books and records at its principal place of business, which shall set
forth an accurate account of all transactions of the Company. Any Stockholder or
its designated representative shall have the right, during normal business hours
and upon two business days prior written notice to the Company specifying the
records or information desired and the purpose for which the records or
information is sought, to have access to and inspect and copy, at its expense,
the contents of such books or records. Any 10% Stockholder or its designated
representative shall have the right, during normal business hours and upon three
(3) business days prior notice specifying the business premises of the Company
that the Stockholder wishes to visit and purpose for which the Stockholder
desires to visit, to personally visit and inspect any business premises of the
Company. The provisions of this Section 2.3 to the contrary notwithstanding, the
Company shall have the right to keep confidential from the Stockholder for such
period of time as the Company deems reasonable, any information which the
Company reasonably believes to be in the nature of trade secrets or other
information the disclosure of which the Company in good faith believes is not in
the best interest of the Company.
SECTION 2.4. SPECIAL VOTING RIGHTS OF THE PIK PREFERRED STOCK.
(a) Class Vote Required. For so long as any shares of PIK Preferred
Stock are outstanding, without the vote of the holders of at least seventy
percent (70%) of the PIK Preferred Stock and, if there has been a Vote Shift as
a result of a Change of Control of Columbia, seventy percent (70%) of those
shares of the then outstanding Common Stock which were issued in exchange for
Class B Units of the LLC (the "Class B Units"), the Company shall not take any
action that:
(i) Alters or changes the rights, preferences or
privileges with respect to the PIK Preferred Stock
(or, if there has been a Vote Shift, the Common
Stock).
(ii) Creates, by reclassification or otherwise, any new
class or series of capital stock having rights,
preferences or privileges senior or pari passu to the
PIK Preferred Stock (or, if there has been a Vote
Shift, the Common Stock).
(iii) Results in any merger, reorganization, Change of
Control of the Company or any transaction or a series
of related transactions in which all or substantially
all of the assets, properties, or businesses of the
Company and its Subsidiaries taken as a whole are
sold or otherwise transferred to Persons other than
the Company or any of its Subsidiaries, unless such
transaction would result in cash proceeds to the
holders of the PIK
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Preferred Stock with respect to the PIK Preferred
Stock of an amount per share equal to or greater than
the Liquidation Preference.
(iv) Results in an IPO that is not a Qualified IPO,
subject to the rights of the Stockholders under the
Registration Rights Agreement.
(v) Results in the redemption or repurchase of any
capital stock of the Company, whether in the form of
cash or promissory notes, or otherwise (except in
connection with the redemption or acquisition of
capital stock of the Company held by employees,
directors, or consultants of the Company or any
Subsidiary, or Permitted Transferees of such Persons,
in connection with or in furtherance of the
termination of such relationship).
(vi) Results in the issuance of any equity interest in the
Company or in any Subsidiary, or rights to acquire
such equity interests, other than under the Employee
Stock Plan or in connection with a Qualified
Financing or an Interim Financing.
(vii) Results in any distribution with respect to any
equity interests in the Company (other than as
permitted in clause (v) above).
(viii) Results in any contract, agreement, loan, transaction
or other relationship with the Company or any
Subsidiary and any of the Columbia Entities, Whitney
or Fleet, or with an Affiliate of any of them
(excluding for this purpose any Subsidiary) provided
that the foregoing shall not prohibit any payment of
Permitted Reimbursements.
(ix) Results in a change in the size, voting or
composition of the Board of Directors.
(x) Results in an increase in the number of shares of
Common Stock authorized to be issued under the
Employee Stock Plan.
(xi) Results in the Company being engaged in any business
other than the distribution of, or the indirect
holding of rights to distribute, DirecTv broadcast
satellite services, programming and products.
(b) Special PIK Preferred Stock Vote. For so long as the any shares of
PIK Preferred Stock are outstanding, without the consent of holders of at least
fifty percent (50%) of the shares of PIK Preferred Stock neither the Company nor
any Subsidiary shall enter into or consummate an acquisition of any NRTC System
(other than those NRTC Systems permitted to be acquired by the LLC), or more
than one NRTC System in the same or a series of related transactions from a
single seller or group of Affiliated sellers, if the acquisition price per
household is greater than $120 or the aggregate purchase price exceeds
$25,000,000; provided, however, that this Section 2.4(b) shall expire on
February 10, 1999.
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(c) Meetings of the Stockholders may be called by any 10% Stockholder
by notice to the other Stockholders setting forth the date and time of the
meeting, the nature of the business to be transacted and the place of the
meeting. Notice of any meeting shall be given in accordance with the Bylaws of
the Company to all Stockholders not less than two (2) days nor more than ninety
(90) days prior to the meeting.
ARTICLE III
PARTICIPATION RIGHTS
SECTION 3.1. PARTICIPATION RIGHTS. Except in the case of issuance of
shares of capital stock of the Company (i) pursuant to the Employee Stock Plan,
(ii) in connection with a Qualified Financing or Interim Financing, (iii) in
exchange for capital contributions consisting of property other than cash, or
(iv) pursuant to Section 6(e) of the Certificate of Designations, prior to
issuing any additional shares of capital stock of the Company all Stockholders
(other than any Stockholders who own shares of Common Stock solely through
participation in the Employee Stock Plan) shall have been offered the right to
purchase their proportionate share of such additional shares of capital stock on
the same terms and subject to the same conditions as the proposed issuance to
others, which rights to purchase shall be offered to such Stockholder in the
ratio that their aggregate number of shares of Stock (other than shares of
Common Stock obtained through the Employee Stock Plan) bear to the aggregate
number of shares of such Stock. Any shares of capital stock not initially
subscribed for by such Stockholders shall be reoffered to those Stockholders
electing initially to purchase their proportionate share hereunder in proportion
to the relative number of shares of Stock held by those Stockholders initially
electing to purchase their proportionate share. The Company shall determine the
timing and such other procedures as may be necessary and appropriate to enable
such Stockholders to exercise their rights hereunder, provided that in any event
such Stockholders shall be given no less than five (5) business days prior
notice before being required to commit to purchase the shares of capital stock
pursuant to this Section 3.1.
ARTICLE IV
TRANSFERS OF STOCK
SECTION 4.1. SCOPE OF ARTICLE; MANDATORY PLEDGE OF STOCK. The
provisions of this Article IV shall apply to all Stock, whether or not held or
acquired by a Stockholder at or after the date of this Agreement or at or after
any time such Stockholder first became subject to this Agreement. Every Transfer
shall be subject to all of the terms, conditions, restrictions, and obligations
of this Agreement. Any attempted Transfer which does not comply with the
provisions of this Article shall be void and the Company shall not recognize the
attempted purchaser, assignee, or transferee for any purpose whatsoever, and the
Stockholder attempting such Transfer shall have breached this Agreement for
which the Company and the non-breaching Stockholders shall have all remedies
available for breach of contract.
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SECTION 4.2. CONDITIONS PRECEDENT TO TRANSFER OF STOCK. Subject to
Sections 4.3 and 4.4, a Stockholder may Transfer all or any shares of Stock held
by such Stockholder if all the following conditions are satisfied:
(a) Prior Notice. At least ten (10) days prior to any proposed Transfer
of Stock otherwise permitted pursuant to this Section, the Stockholder proposing
to Transfer all or any shares of Stock held by such Stockholder gives a Transfer
Notice.
(b) Expenses. The transferor agrees to reimburse the Company for any
expenses reasonably incurred by the Company in connection with the consummation
of the Transfer.
(c) Transfer Documents; Effective Time of Transfer. Such Stockholder
and its purchaser, transferee or assignee shall execute, acknowledge, and
deliver to the Company such instruments of transfer and assignment with respect
to such transaction as are in form and substance reasonably satisfactory to the
Company, including, without limitation, the written agreement of the purchaser,
transferee or assignee to assume and be bound by all of the obligations of the
transferor under this Agreement.
(d) Securities Law Compliance. Either (i) the Transfer is to the heirs,
devisees or legatees of a deceased Stockholder; (ii) the Stock to be Transferred
is registered under the Securities Act of 1933, as amended, and the rules and
regulations thereunder (the "1933 Act"), and any applicable state securities
laws; or (iii) the Company determines that the Transfer qualifies for an
exemption from the registration requirements of the 1933 Act and any applicable
state securities laws. Except as specifically provided in the Registration
Rights Agreement, the Company has no obligation or intention to register any of
the Stock for resale under any federal or state securities laws or to take any
action which would make available any exemption from the registration
requirements of such laws.
(e) Opinion of Counsel. In its discretion, the Company may require as a
condition precedent to any Transfer of Stock delivery to the Company, at the
proposed transferor Stockholder's expense, of an opinion of counsel satisfactory
(both as to the counsel and substance of the opinion) to the Company that the
proposed Transfer will satisfy all or certain of the conditions set forth in
Sections 4.2(c) and (d).
(f) Other Agreements. The Transfer complies with the provision of any
employment agreement or other agreement between the Stockholder and the Company
or any Subsidiary.
SECTION 4.3. RIGHT OF FIRST REFUSAL.
(a) Grant of Option. Upon the occurrence of an Optional Purchase Event
with respect to a Stockholder, the Company, followed by all of the 10%
Stockholders, shall have successive options to purchase all, but not less than
all, of the shares of Stock proposed to be sold, assigned or transferred by such
Stockholder (the "Offered Stock") pursuant to the terms and conditions set forth
in this Agreement.
Upon the occurrence of an Optional Purchase Event, the Stockholder with
respect to whom the Optional Purchase Event has occurred shall immediately give
written notice to the
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Company and to all 10% Stockholders, which notice shall describe the Optional
Purchase Event (unless the Optional Purchase Event is the giving of a Transfer
Notice, in which case the Transfer Notice shall suffice). If the Stockholder
with respect to whom the Optional Purchase Event has occurred does not provide
such notice and another Stockholder knows of the occurrence of such Optional
Purchase Event, such Stockholder may send written notice of the Optional
Purchase Event to the Company, and if the Company determines that Optional
Purchase Event has occurred, the Company shall provide to all 10% Stockholders
the Transfer Notice.
(b) Optional Purchase Events. For purposes of this Agreement, the term
"Optional Purchase Event" shall mean any of the following events with respect to
a Stockholder:
(i) The delivery of a Transfer Notice by the Stockholder
unless such Transfer is to a Permitted Transferee.
(ii) In the case of any Stockholder that is an individual,
the entry by any court of an order or adjudication
that the current or former spouse of the Stockholder
has acquired any rights in any shares of the
Stockholder's Stock as a result of divorce, equitable
distribution or community property partition
proceedings pursuant to the laws of any state or
jurisdiction.
(iii) In the case of any Stockholder who initially received
such Stock from the Company (or an equity interest in
a predecessor of the Company) when such Stockholder
was an officer, director, employee, manager or
independent contractor of the Company or any
Subsidiary, such Stockholder is no longer an officer,
director, employee, manager or an independent
contractor of the Company or any Subsidiary.
(iv) In the case of Columbia, Columbia DBS Investors,
L.P., Columbia DBS, Inc., or any other Stockholder
substantially all of the assets of which consist of
such Stockholder's Stock, any Transfer of its capital
stock or other equity interests, or the sale or
issuance of any capital stock or equity interest in
such Stockholder, unless such Transfer, sale or
issuance is to a Person who was an owner of such
Stockholder on February 10, 1997 or a Permitted
Transferee of such Stockholder (an "Indirect
Transfer"); provided however, Columbia, Columbia DBS
Investors, L.P. or Columbia DBS, Inc. may admit
partners, members or shareholders without triggering
this clause if such partners, members or shareholders
are employees of Columbia Capital Corporation or if
such additional partners, members or shareholders do
not acquire in the aggregate more than ten percent
(10%) of the equity interests in such Columbia
Entity. In the case of an Indirect Transfer, the
right of first refusal under this Section 4.3 and the
right of co-sale under Section 4.4 shall apply to
that number of shares of Stock of the Stockholder
with respect to which an Indirect Transfer has
occurred based upon the amount of the equity interest
of such Stockholder that is Transferred or issued in
the Indirect Transfer relative to the total equity
interests in such Stockholder.
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(c) Proposed Transfer for Consideration. If the Optional Purchase Event
is the delivery of a Transfer Notice or an Indirect Transfer and the Transfer or
Indirect Transfer is for cash, indebtedness, property or other consideration,
then the Company's and the 10% Stockholders' successive options shall be to
purchase the Offered Stock for the fair market value of the consideration
proposed to be received in the Transfer or Indirect Transfer or payable at the
closing described below, and pursuant to all of the other terms and conditions
of the proposed Transfer or Indirect Transfer. The Stockholder desiring to
Transfer the Offered Stock (or the Stockholder with respect to which an Indirect
Transfer has occurred) and the Company (acting on behalf of all Persons who
exercise their option to purchase hereunder) shall attempt to agree, in writing,
on the fair market value of any noncash consideration to be received in the
proposed Transfer. If the Stockholder and the Company are unable to agree on the
fair market value of the noncash consideration within thirty (30) days following
the exercise of the options to purchase granted in this Section, either the
Stockholder or the Company may by notice to the other commence the Appraisal
Process.
(d) Other Optional Purchase Events. If the Optional Purchase Event is
not a proposed Transfer or Indirect Transfer for consideration, then the
successive options shall be for a purchase price equal to (i) the fair market
value of the Offered Stock as of the last day of the calendar month immediately
prior to the occurrence of the Optional Purchase Event (the "Valuation Date"),
plus (ii) interest at the Prime Rate on the amount determined under clause (i)
from the Valuation Date to the closing date, compounded monthly, reduced by
(iii) any dividends or other distributions with respect to the Offered Stock
from the Valuation Date through the closing. For purposes of determining the
purchase price, the fair market value of a share of Stock shall equal the amount
that would be received by the owner of such share of Stock if all of the assets
of the Company were sold for cash equal to their fair market value, the Company
paid all of its liabilities and liquidated, all as of the Valuation Date. The
selling Stockholder and the Company (acting on behalf of all Persons who have
options to purchase hereunder) shall attempt in good faith to agree on the fair
market value of the Offered Stock. If they are unable to agree, in writing, on
the fair market value of the Offered Stock within thirty (30) days following the
exercise of the options to purchase granted in this Section, either the selling
Stockholder or the Company may by notice to the other commence the Appraisal
Process.
(e) Exercise of Option by the Company. The Company shall provide
written notice of exercise of the option to the Stockholder with respect to whom
an Optional Purchase Event has occurred and to all 10% Stockholders within
thirty (30) days following the Transfer Notice or the other written notice to
all 10% Stockholders of the occurrence of the Optional Purchase Event,
specifying whether or not the Company is exercising its option to purchase the
Offered Stock pursuant to this Section. A failure by the Company to give notice
within such period shall be deemed to be a notice of nonexercise.
(f) Exercise of Option by 10% Stockholders. In the event the Company
does not exercise its option, then each of the 10% Stockholders shall have the
option to (i) purchase the Offered Stock pursuant to this Section 4.3 on the
same terms as the Company in proportion to the relative number of shares of
Stock held by all the 10% Stockholders; (ii) exercise the rights of co-sale
specified in Section 4.4 below; or (iii) neither purchase any of such Offered
Stock nor exercise rights of co-sale. In order to exercise its option pursuant
to this Section, a 10%
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Stockholder shall provide written notice of exercise of the option to the
Stockholder with respect to whom an Optional Purchase Event has occurred, to the
Company and to all other 10% Stockholders within thirty (30) days following the
Company's nonexercise. If any 10% Stockholder elects not to exercise their
option, then those 10% Stockholders that do exercise their option shall have the
option, for an additional fifteen (15) days following the end of the option
period for all 10% Stockholders, to acquire the Offered Stock that could have
been acquired by the nonexercising 10% Stockholders in proportion to the
relative number of shares of Stock held by the exercising 10% Stockholders.
(g) Waiver; Failure to Exercise Options. Any party with an option to
purchase Stock pursuant to this Article may waive its option at any time by
notice of such waiver to the Company. With respect to an Optional Purchase Event
that is the giving of a Transfer Notice, if Persons with options under this
Section shall fail to exercise their options to purchase the Offered Stock
within the applicable periods, or in the event the purchaser(s) shall fail to
tender the required consideration at the closing referred to below, then subject
to the rights of co-sale described in Section 4.4 below, the transferring
Stockholder may transfer the Offered Stock to the Person, and upon the terms and
price, specified in the notice of the proposed Transfer, but only if such
Transfer is consummated within ninety (90) days after the expiration or
withdrawal of the last option, or the failure to tender the consideration if
applicable. If the Offered Stock is not so transferred within the applicable
period, the Offered Stock shall again become subject to all of the terms and
conditions of the Agreement and may not thereafter be transferred except in the
manner and on the terms herein provided. In the event the Company or any 10%
Stockholder exercises an option hereunder, but fails to tender the required
consideration at the closing, the transferring Stockholder shall have all rights
and remedies against the Company or the exercising 10% Stockholders, as the case
may be, available for breach of contract, including the remedy of specific
performance.
(h) Closing of Purchase of Stock; Payment of Purchase Price; Security.
The closing of the purchase of any Offered Stock by the Company or any of the
10% Stockholders pursuant to this Section shall occur at the offices of the
Company within thirty (30) days after the earlier of (a) the written agreement
of the parties on the fair market value of the Offered Stock or the
consideration to be received therefor, as the case may be, or (b) the conclusion
of the Appraisal Process. At the closing, the selling Stockholder shall deliver
to the purchaser(s) of the Offered Stock certificates evidencing the Offered
Stock, and the purchaser(s) shall deliver the purchase price as provided below
to the such Stockholder. The selling Stockholder and the purchaser(s) each shall
execute and deliver such other documents as may reasonably be requested by the
other.
The purchase price shall be delivered at closing as follows:
(i) If the purchase of the Offered Stock is as a result of a
proposed Transfer to a third party for consideration, the
purchase price determined under this Agreement shall be
payable on the same basis as the purchase price was to have
been paid by the third party.
(ii) If the purchase of the Offered Stock is as a result of any
other Optional Purchase Event the purchase price shall be
payable in cash or same day funds.
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SECTION 4.4. RIGHT OF CO-SALE.
(a) Right of Co-Sale. In the event of a proposed Transfer of Stock to a
Person who is not a Permitted Transferee, to the extent the Stock proposed to be
transferred is not purchased by the Company pursuant to its right of first
refusal described in Section 4.3, each other Stockholder shall have the right to
participate in the Transfer in the manner set forth in this Section 4.4. Each
such nontransferring Stockholder may Transfer to the proposed transferee
identified in the Transfer Notice a pro rata share (defined below) of such
non-transferring Stockholders Stock, by giving written notice to the Company and
to the transferring Stockholder within the thirty (30) day period specified in
Section 4.3(f), which notice shall state that the Stockholder elects to exercise
its rights of co-sale under this Section 4.4. A notice of exercise of a
Stockholder's right of first refusal under Section 4.3(f) and a notice of
exercise of a Stockholder's rights of co-sale hereunder shall be mutually
exclusive and the first such notice given shall be binding and irrevocable. Each
nontransferring Stockholder shall be deemed to have waived its right of co-sale
hereunder either if it fails to give notice within the prescribed time period or
if such Stockholder gives notice exercising its right of first refusal pursuant
to Section 4.3(f). A nontransferring Stockholder's pro rata share for this
purpose shall equal that number of shares of the nontransferring Stockholder's
Stock represented by the number obtained by multiplying the number of shares of
Stock that are the subject of the proposed Transfer by a fraction, the numerator
of which is the number of shares of Stock then held by such nontransferring
Stockholder, and the denominator of which is the number of shares of Stock then
held by all persons entitled to this right of co-sale plus the number of shares
of Stock proposed to be Transferred by the transferring Stockholder. Insofar as
possible this right of co-sale shall apply to Stock of the same class or classes
as the Stock subject to the Transfer Notice. If any Stockholder desiring to
exercise its rights of co-sale hereunder does not have a sufficient number of
Stock of the same class as the Stock subject to the Transfer Notice, such
Stockholder may substitute Stock of another class so long as such class ranks
senior in liquidation to the class of Stock subject to the Transfer Notice. In
the event the proposed Transfer is of Common Stock and a Person wishing to
exercise its rights of co-sale hereunder does not have sufficient shares of
Common Stock, but has PIK Preferred Stock, such Person may convert a sufficient
number of PIK Preferred Stock into Common Stock in accordance with the
procedures set forth in the Certificate of Designations.
(b) Consummation of Co-Sale. Each nontransferring Stockholder, in
exercising its right of co-sale hereunder, may participate in the Transfer by
delivering to the transferring Stockholder at the closing of the Transfer of the
transferring Stockholder's Stock to the transferee (the "Closing") one or more
certificates duly endorsed representing the shares of Stock to be transferred by
such nontransferring Stockholder. At the Closing, such certificates will be
delivered to the purchaser (whether such purchaser is the proposed transferee
set forth in the Transfer Notice or those Stockholders who have exercised their
rights of first refusal under Section 4.3) and the transferring Stockholder will
remit, or will cause to be remitted, to the nontransferring Stockholder at the
Closing that portion of the proceeds of the Transfer to which such
nontransferring Stockholder would otherwise be entitled by reason of such
nontransferring Stockholder's participation in such Transfer pursuant to these
rights of co-sale.
(c) Indirect Transfers. In the case of an Indirect Transfer, the right
of co-sale under this Section 4.4 shall be the right to put that number of
shares of Stock of the Stockholders
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electing their rights of co-sale hereunder to the Stockholder with respect to
whom the Indirect Transfer has occurred, as if such Stockholder had Transferred
that proportionate number of shares of Stock described in Section 4.3(b)(iv)
above.
SECTION 4.5. APPRAISAL PROCESS.
(a) If a Stockholder and the Company are unable to agree, in writing,
on the fair market value of any shares of Stock or the consideration to be
received in exchange for any shares of Stock within the time limits set forth in
Article IV, at any time following the expiration of such time limit either may
invoke the process described in this Section (the "Appraisal Process") by
sending the notice selecting an appraiser as described in subparagraph (i)
below, in which case the determination of fair market value in accordance with
this Article shall be final and binding on all parties to this Agreement. If the
purchaser of the Stock is one or more of the Stockholders, all decisions
relating to the Appraisal Process shall be made by the Company on behalf of the
Stockholders who have exercised their options to purchase; neither the
Stockholder whose Stock is being purchased nor the nonexercising Stockholders
shall participate in any of the Company's decisions relating to the Appraisal
Process.
(i) First Appraisal. The written notice invoking the Appraisal Process
shall state that the Appraisal Process is being invoked and shall set forth the
name and address of the unrelated third party appraiser selected by the party
invoking the Appraisal Process. Any appraiser selected pursuant to this Section
shall be a Person qualified with respect to determining the fair market value of
the shares of Stock or other property that is in question. The party to the
purchase and sale transaction who did not invoke the Appraisal Process shall
have ten (10) days following the notice of the selection of the first appraiser
to select a second unrelated third party appraiser by sending to the other party
written notice setting forth the name and address of the second appraiser.
If a second appraiser is not selected within the 10 day time period,
the appraiser selected by the party invoking the Appraisal Process shall prepare
his appraisal report and submit it to the owner of the shares of Stock and the
Company within sixty (60) days following the notice of his selection as an
appraiser, in which case the Appraisal Process shall be concluded and the fair
market value of the property in question shall be the amount set forth in the
appraiser's report.
(ii) Second Appraisal. If a second appraiser has been selected pursuant
to subparagraph (i) above, the two appraisers so selected shall consult with
each other in an effort to reach an agreement as to the fair market value. If
the two appraisers shall agree in writing as to the fair market value of the
property in question within forty-five (45) days following the appointment of
the second appraiser, the fair market value of such property shall be the amount
to which the appraisers have agreed, and the Appraisal Process shall be
concluded.
In the event the two appraisers are unable to agree as to the fair
market value, the two appraisers shall prepare their separate reports and submit
them to the Company and the owner of the shares of Stock within sixty (60) days
following the appointment of the second appraiser. If the higher fair market
value exceeds the lower fair market value by 10% or less of the lower fair
market value the Appraisal Process shall be concluded and the fair market value
of the
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property in question shall be the average of the two fair market values as set
forth in the two appraisal reports. If the higher fair market value exceeds the
lower fair market value by more than 10% of the lower fair market value, the
owner of the shares of Stock and the Company shall further attempt to agree as
to the fair market value.
(iii) Third Appraisal. If the higher fair market value of the two
appraisals exceeds the lower fair market value by more than 10% of the lower
fair market value and, as of the eleventh (11th) day following the submission of
both appraisal reports, neither party has sent written notice calling for a
third appraiser, the Appraisal Process shall be concluded and the fair market
value of the property in question shall be the average of the two fair market
values as set forth in the two appraisal reports. If, however, the higher fair
market value exceeds the lower fair market value by more than 10% of the lower
fair market value and, within ten (10) days following the submission of the
first two appraisers' reports, either party sends written notice to the other
calling for a third appraiser, the two previously-selected appraisers shall
promptly (but in any event within thirty (30) days following the submission of
both appraisal reports) select a third appraiser to determine the fair market
value of the property in question. The first two appraisers shall notify the
Company, which shall in turn notify the owner of the shares of Stock and all
other Stockholders, of the name and address of the third appraiser so selected;
provided, however, that if the Company has not received notice of the name and
address of the third appraiser within such thirty (30) day period, then the fair
market value of the property in question shall be the average of the two
appraisals that have been completed. Neither the previously selected appraisers,
the Stockholder whose shares of Stock are being purchased, the Company, the
Stockholders nor any Persons related to any of them shall disclose to the third
appraiser the appraisal reports of the first two appraisers or the results of
the first two appraisals. Within thirty (30) days following his appointment, the
third appraiser shall submit to the owner of the shares of Stock and the Company
his appraisal report, in which case the Appraisal Process shall be concluded and
the fair market value of the property in question shall be the average of the
two appraisals that are closest to each other.
(b) Costs of Appraisal Process.
(i) General Rules. Unless provided otherwise in clause (b)(ii) below,
the costs of the Appraisal Process shall be borne equally by the Stockholder
whose shares of Stock are being purchased and by the Person(s) obligated to
purchase such shares of Stock. If one or more of the Stockholders exercised its
option to purchase such shares of Stock, the portion of the costs of the
Appraisal Process that are not borne by the owner of such shares of Stock shall
be divided among the exercising Stockholders based upon the relative number of
shares of Stock being purchased.
(ii) Exception. Notwithstanding subparagraph (i) above, in the event a
party calls for a third appraiser as provided above and the fair market value of
the property in question as determined pursuant to the Appraisal Process is less
favorable to that party than if the fair market value was determined by
averaging the appraised fair market values as determined by the first two
appraisers, the entire costs of the Appraisal Process shall be borne by the
party calling for the third appraiser.
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ARTICLE V
BOARD OF DIRECTORS
SECTION 5.1. SIZE AND COMPOSITION OF BOARD OF DIRECTORS. (a) Each of
the Stockholders agrees that the number of members of the Board of Directors
shall be seven (7) and that such Stockholder shall not take or permit to be
taken any action, unless expressly permitted by this Section 5.1, which would
change such number. Each Stockholder agrees to vote or otherwise cause the
election of the following individuals as directors:
(i) Two (2) individuals designated in writing by Whitney (each, a
"Whitney Designee").
(ii) One (1) individual designated in writing by Xxxxxxxx (the
"Xxxxxxxx Designee").
(iii) The chief executive officer of the Company, as may be elected
from time to time by the Board of Directors.
(iv) Those two (2) individuals elected by a vote of the holders of
Common Stock who received such Common Stock in exchange for
Class B Units pursuant to the Preferred Stock Corporate
Conversion, with each such holder being entitled to cast that
number of votes equal to the number of such shares of Common
Stock held by such holder, which vote shall be taken
separately with respect to each of the two (2) seats without
cumulative voting. The two (2) individuals designated pursuant
to this clause (iv) shall be entitled to two (2) votes each on
all matters before the Board of Directors until such time that
the size of the Board of Directors is increased to nine
members as provided below, or until there is a Vote Shift.
(v) One (1) individual elected by a vote of the holders of the
Common Stock, with each such holder being entitled to cast
that number of votes equal to the number of such shares of
Common Stock held by such holder.
Those Persons serving on the board of managers of the LLC on the date
hereof shall continue to serve as members of the Board of Directors until their
death or resignation, or until their successor is designated as provided herein.
(b) Upon the affirmative vote of Columbia, Whitney and Xxxxxxxx, the
size of the Board of Directors shall be increased from seven (7) to nine (9).
The two additional seats shall be filled by individuals approved by Columbia,
Whitney and Xxxxxxxx, and elected by holders of a majority of the Stock, and who
are not otherwise Affiliates of any of the Columbia Entities, Whitney or Fleet.
In the event of such an increase in the size of the Board of Directors, the two
(2) individuals designated pursuant to clause (iv) above and the two (2) new
designated individuals shall be entitled to one vote each.
Within five (5) days following any Change of Control of Columbia, then
the Columbia Entities shall give notice of such event to Whitney and Xxxxxxxx
("Change Notice"). If the
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Columbia Entities do not give the required Change Notice, Columbia and Columbia
DBS Investors, L.P. shall be in breach of this Agreement, and in addition
Whitney or Xxxxxxxx still have the right at any time to give the Change Notice.
At any time following a Change Notice and continuing for a period of one year
thereafter, either Whitney or Xxxxxxxx shall have the right to implement the
Vote Shift by notice to the Board and all of the Stockholders. The Vote Shift
shall be effective immediately upon such notice; provided however, if the Change
of Control of Columbia is curable, the Columbia Entities shall have 90 days
following the Vote Shift to cure the Change of Control of Columbia, and if cured
within such period the Vote Shift shall be deemed rescinded as of the date of
such cure.
(c) The Board of Directors shall meet not less often than once per
quarter. In the event that the Board of Directors create an "Executive
Committee," a "Compensation Committee," an "Audit Committee," or committees with
similar functions such committees shall have at least one member designated by
each of Columbia, Whitney and Xxxxxxxx.
(d) At such time as there are no longer any shares of PIK Preferred
Stock outstanding, the following shall be the composition of the Board of
Directors: (i) the size of the Board of Directors shall be the same as that
immediately prior to such time, (ii) each member of the Board of Directors shall
have one vote on all matters and (iii) all directors shall be elected by the
holders of the Common Stock.
SECTION 5.2 INSURANCE. The Company shall maintain in force "directors
and officers" insurance for the members of the Board of Directors in such form
and with such coverage amounts as shall be determined by the Board of Directors
and satisfactory to Whitney and Fleet (but in no event shall coverage in excess
of $3,000,000 be required by Whitney and Fleet). The Company shall maintain in
force so long as requested to do so by Whitney, Fleet, or Columbia, key man
insurance on the life of the Company's Chief Executive Officer in an amount of
coverage not less than $10,000,000 and on the life of the Company's Chief
Financial Officer in an amount of coverage not less than $3,000,000, provided,
however, that such individuals are insurable at commercially reasonable rates.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1. NOTICES. Any notice, payment, demand, or communication
required or permitted to be given by any provision of this Agreement shall be in
writing and shall be delivered personally to the Person or to an officer or
manager of the Person to whom the same is directed, or sent by regular,
registered, or certified United States mail, or by facsimile transmission or by
private mail or courier service, addressed as follows: if to the Company, to the
principal office address of the Company, or to such other address as may be
specified from time to time by notice to the Stockholders; if to a Stockholder,
to the address set forth in the records of the Company, or to such other address
as the Stockholder may specify from time to time by notice to the Company. Any
such notice shall be deemed to be delivered, given, and received for all
purposes (i) as of the date of actual receipt if delivered personally or if sent
by regular mail, facsimile transmission or by private mail or courier service,
or (ii) four (4) business days after the date on which the same was deposited in
a regularly-maintained
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receptacle for the deposit of United States mail, if sent by registered or
certified United States mail, postage and charges prepaid, return receipt
requested.
SECTION 6.2. BINDING EFFECT. Except as otherwise provided in this
Agreement, every covenant, term, and provision of this Agreement shall be
binding upon and inure to the benefit of the Stockholders, and their respective
heirs, legatees, legal representatives, successors, transferees, and assigns.
SECTION 6.3. CONSTRUCTION. Every covenant, term and provision of this
Agreement shall be construed simply according to its fair meaning and not
strictly for or against any Stockholder. No provision of this Agreement is to be
interpreted as a penalty upon, or a forfeiture by, any party to this Agreement.
The parties acknowledge that each party to this Agreement has shared equally in
the drafting and construction of this Agreement and, accordingly, no court
construing this Agreement shall construe it more strictly against one party
hereto than the other.
SECTION 6.4. ENTIRE AGREEMENT; RELATIONSHIP TO CERTIFICATE OF
INCORPORATION AND BYLAWS; AMENDMENTS. This Agreement constitutes the entire
agreement among the Stockholders with respect to the affairs of the Company and
the conduct of its business, and supersedes all prior agreements and
understandings, whether oral or written. To the extent any provision of this
Agreement is inconsistent with any provision of the Certificate of Incorporation
(including the Certificate of Designations) or Bylaws of the Company, the
Stockholders agree that as among themselves this Agreement shall control. The
Stockholders agree to take any action necessary, including voting their Stock,
to give effect to the foregoing sentence. This Agreement may only be amended by
an agreement in writing signed by the Company and by (i) Preferred Stockholders
holding of record 70% or more of the then outstanding PIK Preferred Stock and
(ii) Stockholders holding of record 70% or more of those shares of the then
outstanding Common Stock which were issued in exchange for Class B Units. Any
such amendment shall be binding on the Company and all Stockholders.
SECTION 6.5. HEADINGS. Section and other headings contained in this
Agreement are for reference purposes only and are not intended to describe,
interpret, define, or limit the scope, extent, or intent of this Agreement or
any provision hereof.
SECTION 6.6. SEVERABILITY. Every provision of this Agreement is
intended to be severable. If any term or provision hereof is illegal or invalid
for any reason whatsoever, such illegality or invalidity shall not affect the
validity or legality of the remainder of this Agreement.
SECTION 6.7. ADDITIONAL DOCUMENTS. Each Stockholder, upon the request
of the Company, agrees to perform all further acts and execute, acknowledge, and
deliver any documents that may be reasonably necessary, appropriate, or
desirable to carry out the provisions of this Agreement.
SECTION 6.8. VARIATION OF PRONOUNS. All pronouns and any variations
thereof shall be deemed to refer to masculine, feminine, or neuter, singular or
plural, as the identity of the Person or Persons may require.
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SECTION 6.9. TERMINATION. Notwithstanding any other provision herein
contained to the contrary, this Agreement shall be terminated and shall cease to
have any force and effect upon the consummation of a Qualified IPO (as defined
in the Certificate of Designations of the PIK Preferred Stock).
SECTION 6.10. GOVERNING LAW; CONSENT TO JURISDICTION; DISPUTE
RESOLUTION.
(a) The laws of the State of Delaware shall govern the validity of this
Agreement and the construction and interpretation of its terms. All disputes
between or among any Stockholders arising out of or in any way connected with
the execution, interpretation and performance of this Agreement (including the
validity, scope and enforceability of the dispute resolution provisions
contained herein) shall be solely and finally settled in accordance with this
Section 6.10. Each Stockholder hereby irrevocably consents to the personal
jurisdiction of the courts of the Commonwealth of Virginia with respect to
matters arising out of or related to the enforcement of the provisions of this
Section 6.10 and with respect to matters, if any, related to this Agreement not
required to be resolved pursuant to this Section 6.10.
(b) Mandatory Arbitration. All disputes between or among any
Stockholders arising out of or in connection with the execution, interpretation
and performance of this Agreement (including the validity, scope and
enforceability of this arbitration provision) shall be solely and finally
settled by a board of arbitrators consisting of either one arbitrator or three
arbitrators, as set forth below (the term "Arbitrators" shall refer to the board
of arbitrators, whether it consists of one or three members). The arbitration
proceedings shall be held in the Washington, D.C. metropolitan area, and except
as otherwise may be provided in this Section, the arbitration proceedings shall
be conducted in accordance with the Commercial Arbitration Rules (the "AAA
Rules") of the American Arbitration Association (the "AAA").
(c) Arbitration Notice. If a Stockholder or Stockholders determine to
submit a dispute for arbitration pursuant to this Section, such Stockholder(s)
shall furnish the other Stockholders with a dated, written statement (the
"Arbitration Notice") indicating (i) such Stockholder's intent to commence
arbitration proceedings, (ii) the nature, with reasonable detail, of the dispute
and (iii) the remedy or remedies such Stockholder will seek.
(d) Selection of Sole Arbitrator. Within ten (10) days of the date of
the Arbitration Notice, the Stockholder or Stockholders commencing the
arbitration (collectively, the "Petitioner") and the party with whom the
Petitioner has its dispute (collectively, the "Respondent") shall attempt to
agree on and then select one neutral arbitrator (the "Sole Arbitrator"). A
"neutral" arbitrator shall be a Person who would not be subject to
disqualification under rule No. 19 of the AAA Rules.
(e) Arbitration Panel. If, within such ten (10) day period, the
Petitioner and Respondent are unable to agree upon a Sole Arbitrator, each of
them shall have five (5) business days (following the expiration of the ten (10)
day period) to select (and provide written notice of such selection to the other
Stockholders and the Company) a qualifying arbitrator. A "qualifying" arbitrator
is a Person who is not (i) an Affiliate or Family Member of either the
Petitioner or Respondent or (ii) counsel to any such Person at such time. If
either the Petitioner or Respondent fails to select a qualifying arbitrator or
provide such notice within the five (5) day
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period, the AAA shall have the right to make such selection. (Such qualifying
arbitrators hereafter may be referred to, respectively, as the "First
Arbitrator" and the "Second Arbitrator.") Within ten (10) days following their
selection, the First and Second Arbitrator shall select (and provide written
notice to the Stockholders and the Company of such selection) a third arbitrator
(the "Third Arbitrator") from a list of members of the AAA's National Panel of
Commercial Arbitrators. The Third Arbitrator must be "neutral" as that term is
defined above. Notwithstanding the foregoing, if a dispute involves more than
two Stockholders, all proceedings shall be conducted before a Sole Arbitrator,
who shall be selected by the AAA if the Stockholders are unable to agree upon
such Sole Arbitrator within the ten (10) day period mentioned above.
(f) Discovery Requests. At any time within forty (40) days after the
date of the Arbitration Notice, the Petitioner and Respondent can make discovery
requests of the other (including, but not limited to, requests for delivery of
documents, production of witnesses for testimony and delivery of interrogatory
responses). The recipient of a discovery request shall have ten (10) days after
the receipt of such request to object to any or all portions of such request and
make an application to the Arbitrators to limit the scope of such discovery
request, and shall respond to any portions of such request not so objected to
within twenty (20) days of the receipt of such request. All objections shall be
in writing and shall indicate the reasons for such objections. Within five (5)
business days after the end of the period for the submission by the requested
party of an application to limit the discovery request, the Arbitrators shall
grant or deny such discovery request, in whole or in part, to the extent the
Arbitrators determine such discovery is or is not, as the case may be,
reasonably necessary to enable the requesting party to obtain information
relevant to the dispute without unreasonably burdening the requested party. The
requested party shall comply with a discovery request granted by the Arbitrators
within ten (10) business days after such discovery request is granted, or within
such longer period as the Arbitrators may determine upon application of the
requested party for extension thereof for reasonable cause. Neither party shall
be permitted to make more than one application for discovery to the Arbitrators.
All depositions shall be taken in the city in which the Person being deposed
resides or has its principal place of business, unless otherwise agreed by the
parties. The Arbitrators are not authorized to subpoena documents or perform
independent investigations.
(g) Timing of Hearings. Hearings must commence no later than ninety
(90) days following the date of the Arbitration Notice and such hearings shall
be conducted for no more than five (5) business days.
(h) Format of Hearings. Each of the Petitioner and the Respondent shall
submit a brief, outlining such party's claim for relief or defense to any claim,
to the other and to the Arbitrators on or before the tenth (10th) day following
the date of the last hearing. Reply briefs must be exchanged and submitted to
the Arbitrators on or before the twentieth (20th) day following the date of the
last hearing. The final decision of the Arbitrators is due on or before the
thirtieth (30th) day following the date of the last hearing. The Arbitrators
shall choose the form of final decision that, in their judgment, is most
consistent with the terms of this Agreement and the intent of the Stockholders,
as supported by evidence presented by the Petitioner and Respondent in the
arbitration proceeding or, if the subject matter of the dispute is not clearly
addressed in or determinable under this Agreement, that, in their opinion, would
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be most fair to the Petitioner and Respondent under the arbitration. The
Arbitrators shall not be required to provide reasons for their decision.
(i) Fees and Expenses. The fees of the First and Second Arbitrators
shall be borne by the Petitioner and Respondent, respectively. All other
expenses of the arbitration shall be shared equally by the Petitioner and
Respondent in accordance with the AAA Rules.
(j) Arbitrators' Discretion. The foregoing time periods and procedural
steps may be modified or extended by the Arbitrators in their discretion to the
extent they deem necessary to prevent fundamental unfairness; provided that at
all times the Arbitrators shall be mindful of the Stockholders' desire for the
most expeditious possible resolution of the Stockholders' disputes; and
provided, further, that a final decision of the Arbitrators shall be rendered
within 120 days of the Arbitration Notice.
(k) Enforceability. To the extent permissible under applicable law, the
Stockholders agree that the award of the Arbitrators shall be final and shall
not be subject to judicial review. Judgment on the arbitration award may be
entered and enforced in any court having jurisdiction over the parties or their
assets. It is the intent of the parties that the arbitration provisions hereof
be enforced to the fullest extent permitted by applicable law, including the
Federal Arbitration Act, 9 U.S.C. Section 2.
(l) Injunctive Relief. Nothing contained in this Section shall prevent
a Stockholder from seeking injunctive relief or require arbitration of any issue
for which injunctive relief is sought by either party hereto.
SECTION 6.11. COUNTERPART EXECUTION; FACSIMILE EXECUTION. This
Agreement may be executed in any number of counterparts with the same effect as
if the Company and all of the Stockholders had signed the same document. Such
executions may be transmitted to the Company and/or the other Stockholders by
facsimile and such facsimile execution shall have the full force and effect of
an original signature. All fully executed counterparts, whether original
executions or facsimile executions or a combination, shall be construed together
and shall constitute one and the same agreement.
SECTION 6.12. DISSOLUTION OF THE COMPANY.
(a) TRIGGERS. The Company shall dissolve at any time after
February 10, 2003, if at such time the aggregate Liquidation Preference is at
least $7.5 million (excluding the Liquidation Preference on any PIK Preferred
Stock distributed as a dividend) and holders of at least a majority of PIK
Preferred Stock then outstanding vote to dissolve the Company and provide notice
of such vote to the Board of Directors; provided, however, that in the event
that such a vote and resulting dissolution of the Company would result in an
event of default or an incipient default under any then existing indebtedness of
the Company or any Subsidiary with an outstanding balance of $10 million or
more, then such majority vote shall not cause the dissolution of the Company,
but rather shall constitute notice by the holders of the PIK Preferred Stock to
the Board of Directors that such holders desire that the Board of Directors
promptly arrange the sale of the Company (including its Subsidiaries) or a sale
of all or substantially all of its assets.
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(b) WINDING UP OR SALE. Upon dissolution of the Company the
Board of Directors shall wind up the Company's affairs; but the Delaware Court
of Chancery, upon cause shown, may wind up the Company's affairs upon
application of any 10% Stockholder, his legal representative or assignee, and in
connection therewith, may appoint a liquidating trustee. The Persons charged
with winding up the Company shall settle and close the Company's business, and
dispose of and convey the Company's noncash assets as promptly as reasonably
possible following dissolution as is consistent with obtaining the fair market
value for the Company's assets.
If the holders of the PIK Preferred Stock have given notice under
Section 6.12(a) (regardless of whether such notice has caused the dissolution of
the Company), and if the Company has not entered into a definitive agreement for
the sale or other disposition of substantially all of its equity interests or
assets on or prior to the date that is six (6) months after the date of such
notice, or if the Company has not closed the sale or other disposition of
substantially all of its equity interests or assets on or prior to the date that
is nine (9) months after the date of such notice, then at any time after either
of such dates the holders of the PIK Preferred Stock acting by a vote of the
holders of a majority of such PIK Preferred Stock may give notice of a Vote
Shift, which Vote Shift shall be immediately effective.
SECTION 6.13. SPECIAL PRICE ADJUSTMENT IN THE CASE OF INTERIM
FINANCING. If, in connection with any Interim Financing, the Company is required
to issue Common Stock or rights or warrants entitling the holders thereof to
subscribe for or to purchase shares of Common Stock, then in lieu of the
weighted average price protection provided in Section 6(e)(iii) of the
Certificate of Designations, the number of shares of Common Stock into which the
shares of PIK Preferred Stock shall be convertible shall be increased so that:
(i) the ratio of (x) the number of shares of Common Stock into
which the PIK Preferred Stock is convertible immediately after such Interim
Financing to (y) the sum of (A) the total number of shares of Common Stock
outstanding (on a fully diluted basis) immediately after such Interim Financing
plus (B) shares of Common Stock underlying the PIK Preferred Stock immediately
after such Interim Financing equals
(ii) the ratio of (x) shares of Common Stock underlying the
PIK Preferred Stock immediately before such Interim Financing to (y) the sum of
(A) the total number of shares of Common Stock outstanding (on a fully diluted
basis) immediately before such Interim Financing plus (B) the total number of
shares of Common Stock into which the PIK Preferred Stock is convertible
immediately before such Interim Financing.
In addition, any commitment, underwriting, structuring or syndication fees
(other than customary periodic agency fees for administrative services) in
excess of four percent (4%) of the principal amount of the Interim Financing
which are payable by the Company in connection therewith shall be borne by the
Columbia Entities in proportion to their equity interests without recourse to
the Company.
SECTION 6.14. TIME OF THE ESSENCE. Time is of the essence with respect
to each and every term and provision of this Agreement.
[SIGNATURES FOLLOW ON THE NEXT PAGE]
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Execution Page to the Stockholders Agreement
IN WITNESS WHEREOF, the Company and Stockholders have executed this
Agreement on the following execution pages, to be effective as of the date first
set forth above.
THE COMPANY:
DIGITAL TELEVISION SERVICES, INC.
a Delaware corporation
By: ________________________________
Xxxxxxx X. Xxxxxxxx, Xx.
President
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Execution Page to the Stockholders Agreement
STOCKHOLDERS:
COLUMBIA DBS, INC.,
a Virginia corporation
COLUMBIA DBS CLASS A INVESTORS, LLC
a Delaware limited liability company
COLUMBIA DBS INVESTORS, L.P.,
a Delaware limited partnership
WHITNEY EQUITY PARTNERS, L.P.
a Delaware limited partnership
FLEET VENTURE RESOURCES, INC.
a Rhode Island corporation
FLEET EQUITY PARTNERS VI, L.P.,
a Delaware limited partnership
XXXXXXXX PARTNERS III, L.P.,
a Delaware limited partnership
XXXXXXX PLAZA PARTNERS,
a Rhode Island general partnership
XXXXXXX X. XXXXXXXX, XX.
HOLLADAY FAMILY LIMITED PARTNERSHIP,
a Georgia limited partnership
XXXXXXX X. XXXXXX
XXXXXX X. XXXXXXX
XXXXX X. XXXXXXXXX
XXXXXX X. BING
XXXX X. XXXXXXX
XXXXX X. XXXX
W. XXXX XXXXXX
XXXX X. XXXXXXXXX
XXXXX X. XXXXXXXXX
XXXXXX X. XXXXX
XXXXXXX X. XXXXXXX
XXXXXXX X. XXXXXXX
By: DTS Management, LLC,
a Georgia limited liability company,
their Attorney-in-Fact
By: ____________________________
Xxxxxxx X. Xxxxxxxx, Xx.
President
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